BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                   SB 214|
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                                 THIRD READING


          Bill No:  SB 214
          Author:   Wolk (D)
          Amended:  4/25/11
          Vote:     21

           
           SENATE GOVERNANCE & FINANCE COMMITTEE  :  6-3, 4/27/11
          AYES:  Wolk, DeSaulnier, Hancock, Hernandez, Kehoe, Liu
          NOES:  Huff, Fuller, La Malfa


           SUBJECT  :    Infrastructure financing districts

           SOURCE  :     Author


           DIGEST  :    This bill repeals the voter approval 
          requirements to form an Infrastructure Financing Districts 
          (IFD), issue IFD bonds, and set the IFD's appropriations 
          limit.

           ANALYSIS  :    Cities and counties can create IFDs and issue 
          bonds to pay for community scale public works:  highways, 
          transit, water systems, sewer projects, flood control, 
          child care facilities, libraries, parks, and solid waste 
          facilities.  To repay the bonds, IFDs divert property tax 
          increment revenues from other local governments for 30 
          years.  However, IFDs can't divert property tax increment 
          revenues from schools (SB 308 İSeymour], Chapter 1575, 
          Statutes of 1990).

          The following outlines changes to existing law:

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          1.   Voter approval  .  Under existing law, after preparing an 
             infrastructure financing plan, local officials must get 
             voter approval to:

                  Form the IFD, which requires 2/3-voter approval.

                  Issue bonds, which requires 2/3-voter approval.

                  Set the appropriations limit, which requires 
                majority-voter approval.

              This bill  repeals the voter approval requirements to 
             form an IFD, issue IFD bonds, and set the IFD's 
             appropriations limit.

          2.   Fire district approval  .  Under existing law, before an 
             IFD can divert property tax increment from another 
             taxing entity, every local agency that will contribute 
             its property tax increment revenue to the IFD must 
             approve the infrastructure financing plan.  Some special 
             districts are governed ex officio by county boards of 
             supervisors or city councils.

             In the case of a special district that provides fire 
             protection services where the county board of 
             supervisors is the governing authority, 
              this bill  requires the special district to act on an 
             IFD's plan by adopting a separate resolution.

          3.   Bond terms  .  Under existing law, the terms of IFDs' 
             bonds can't be more than 30 years.  

              This bill  extends the maximum term of IFDs' bonds from 
             30 years to 40 years.

          4.   Accountability  .  The current IFD law is silent on 
             fiscal protections, project management, or reporting 
             measures.  

              This bill  requires that local officials' resolution of 
             intention to form an IFD must state the goal and need of 
             the district and that the resolution be posted on the 
             legislative body's Internet web site.  This bill 
             clarifies that IFDs can't be used for maintenance, 

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             services, or to compensate the members of the 
             legislative body.  This bill requires the legislative 
             body to mail an annual report to landowners in the 
             district and each affected taxing entity.  The report 
             must also be posted on the legislative body's website.  
             The report must include: 

                  A summary of the IFD's expenditures.

                  A progress report of the IFD's adopted goals.

                  An assessment of the status of the IFD's public 
                works projects.

             If the IFD fails to submit the annual report to its 
             landowners or taxing entities, or the report is not put 
             on the legislative body's Internet, it can't spend any 
             funds to construct public works projects until the 
             report is submitted.  If the IFD fails to show progress 
             for five consecutive years, it can't spend any funds to 
             construct any new public works projects. Any excess 
             property tax increment revenues that may have been 
             allocated to the new public works projects would be 
             re-allocated according to the adopted formula. 

          5.   Redevelopment project areas  .  Under current law, an IFD 
             can't overlap a redevelopment project area.  

              This bill  repeals that statutory prohibition.

          6.   Big box retailers and vehicle dealers  .  State law 
             prohibits a community from giving financial 
             assistance-direct below-market property deals or cuts in 
             fees-to a big box retailer or vehicle dealer that 
             relocates in the same market area (SB 114 İTorlakson], 
             Chapter 781, Statutes of 2003).  That law applies to 
             counties, cities, and redevelopment agencies.

              This bill  prohibits IFDs from providing financial 
             assistance to big box retailers or vehicle dealers to 
             relocate from one local agency to another in the same 
             market area. 

          7.   Disadvantaged communities  .  State law defines 

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             disadvantaged communities as those with median household 
             incomes less than 80 percent of the statewide average.  
             Severely disadvantaged communities have median household 
             incomes less than 60 percent of the statewide average.  
             Many disadvantaged communities lack adequate public 
             services and facilities like clean water, sewers, paved 
             streets, storm drains, and street lights.  Advocates 
             want legislators to require local officials to include 
             disadvantaged communities in their long-range planning 
             for land use and public facilities.

              This bill  declares that it is in the public interest for 
             IFDs to finance public works for disadvantaged 
             communities. 

          8.   Polanco Act  .  The Polanco Redevelopment Act encourages 
             cleanup and development of brownfields-properties 
             contaminated by hazardous waste.  The Polanco Act 
             authorizes redevelopment agencies to conduct a cleanup 
             and to recover the costs of that cleanup from 
             responsible parties.  Redevelopment agencies that 
             conduct these cleanups, and individuals that enter into 
             redevelopment agreements with the agency, immune from 
             future cleanup liability.

              This bill  allows IFDs to finance necessary actions to 
             clean-up brownfield sites under the Polanco Act. 

          9.   Sustainable Communities Strategy  .  The Sustainable 
             Communities and Climate Protect Act requires the Air 
             Resources Board to set regional targets for automobiles' 
             and light trucks' greenhouse gas emission reduction, 
             requires a regional transportation plan to include a 
             Sustainable Communities Strategy (SCS) to meet targets 
             for greenhouse gas emission reduction, requires the 
             California Transportation Commission to maintain 
             guidelines for travel demand models, requires cities and 
             counties to revise their housing elements every eight 
             years in conjunction with the regional transportation 
             plan, and relaxes California Environmental Quality Act 
             requirements for housing developments that are 
             consistent with a SCS (SB 375 İSteinberg], Chapter 728, 
             Statutes of 2008).  


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              This bill  allows IFDs to finance any projects to 
             implement a SCS.

           Comments
           
          The author's office indicates this bill creates a more 
          flexible development tool to finance needed public works 
          projects, while incorporating rigorous accountability 
          measures to ensure local government diligence, positive 
          project results, and healthier community development.  This 
          bill recognizes the potential for infrastructure financing 
          districts to implement SB 375's (Steinberg, 2008) SCS and 
          the benefits of protecting and rehabilitating brownfields 
          from hazardous waste.  Local officials use tax increment 
          financing to divert part of the property tax revenue stream 
          to a separate IFD.  If a local government decides not to 
          participate in the IFD formation, its tax increment revenue 
          shares are not touched.  Before taxes are raised, 
          assessments are levied, or bonds are issued, the California 
          Constitution requires local officials to get voters' 
          approval:  special taxes require 2/3-voter approval; 
          general taxes require majority-voter approval; benefit 
          assessments require a weighted ballot approval by property 
          owners; local general obligation bonds that require new 
          property tax revenues need 2/3-voter approval; local 
          revenue bonds that rely on new fee revenues require 
          majority-voter approval.  However, in contrast to taxes, 
          assessments, or bonds, IFDs neither raise taxes nor 
          generate new revenue.  This bill removes the requirement 
          for voter approval of IFDs' plans, bonds, and 
          appropriations limits.  Legislators and voters who have 
          elected their local representatives should let local 
          officials do their job-setting local priorities for 
          spending local revenues.

          The California Constitution requires 2/3-voter approval 
          before cities or counties can issue long-term debt backed 
          by local general purpose revenues; school districts need 55 
          percent-voter approval.  That is why local general 
          obligation bonds need 2/3-voter approval.  The courts have 
          explained that cities need 2/3-voter approval before they 
          dedicate portions of their general funds to pay for bonds.  
          That is why local limited obligation bonds need 2/3-voter 
          approval.  However, because that constitutional limit does 

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          not mention redevelopment agencies, local officials do not 
          need voter approval before they issue tax allocation bonds. 
           Redevelopment agencies are not diverting local general 
          funds, they pay for their bonds with property tax increment 
          revenues.  When Governor Deukmejian signed SB 308 (Seymour, 
          1990) that created IFDs, there was a political agreement 
          that local officials should get 2/3-voter approval before 
          they could issue IFD bonds.  That requirement is statutory 
          and not based on a constitutional limitation.  There is no 
          constitutional requirement for IFDs to seek 2/3-voter 
          approval (or any voter-approval) before they issue bonds 
          backed by property tax increment revenues.  This bill 
          repeals the statutory requirement for 2/3-voter approval on 
          IFDs' bonds.  

          The Senate Local Government Committee indicates for many 
          years, local 
          officials were reluctant to form IFDs because they worried 
          about the constitutionality of using tax increment revenue 
          from property not within a redevelopment project area.  In 
          1998, an Attorney General's opinion allayed those concerns, 
          and the City of Carlsbad formed an IFD to fund the public 
          works for a new hotel and any future public works needed to 
          develop Legoland theme park up to $1.5 million.  To date, 
          it is the only example of a finished IFD project.   
          Intrigued by the concept, other local officials have 
          persuaded legislators to pass special bills that adapt the 
          IFD statute to their local circumstances:

           SB 207 (Peace), Chapter 773, Statutes of 1999 - border 
            development zone IFD.

           SB 223 (Kelley), Chapter 59, Statutes of 1999 - Salton 
            Sea Authority IFD.


           SB 1085 (Migden), Chapter 213, Statutes of 2005 - San 
            Francisco waterfront IFD.

           AB 2882 (De La Torre), Chapter 197, Statutes of 2006 - 
            Orangeline mag-lev train IFD.

           Similar Legislation
           

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          AB 485 (Ma), 2011-12 Session, utilizes IFDs to create more 
          transit-oriented development and related low-income 
          housing.  

          AB 664 (Ammiano), 2011-12 Session, authorizes, under 
          existing authorization for the City of County of San 
          Francisco to create IFDs, the adoption of a financing plan 
          and use of IFD revenues for the portion of the San 
          Francisco waterfront district designated as the America's 
          Cup venue.  

          AB 664 (Ammiano), 2011-12 Session, also requires the County 
          Board of Supervisors to submit a fiscal analysis to the 
          California Infrastructure and Economic Development Bank for 
          review and approval before adopting the resolution 
          authorizing issuance of debt.  

          AB 910 (Torres), 2011-12 Session, expands the list of 
          project IFDs can finance to include affordable housing 
          facilities and economic development.  

          SB 310 (Hancock), 2011-12 Session, which seeks to use IFDs 
          for transit priority projects.  

          AB 1836 (Fueur), 2007-08 Session, which would have repealed 
          the 2/3-voter approval for local officials to form an IFD, 
          repealed the 2/3-voter approval to issue tax bonds, and 
          extended the time an IFD could receive property tax 
          increment revenues from 30 years to 40 years.  AB 1836's 
          intent was to adapt IFDs to public transit projects.  The 
          bill failed passage in the Senate Local Government 
          Committee.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No   
          Local:  No

           SUPPORT  :   (Verified  4/28/11)

          California Professional Firefighters
          California Rural Legal Assistance Foundation
          California Special Districts Association
          California State Association of Counties
          County of Yolo
          Davis Board of Education Trustee Susan Lovenburg

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          Non-Profit Housing Association of Northern California
          Imperial County Board of Supervisors

           OPPOSITION  :    (Verified  4/28/11)

          California Taxpayers Association
          Howard Jarvis Taxpayers Association

           ARGUMENTS IN SUPPORT  :    The California Special Districts 
          Association note in their letter of support that "Senate 
          Bill 214 removes a number of key impediments to forming and 
          utilizing Infrastructure financing districts, providing an 
          important alternative to traditional redevelopment agency 
          project area financing, specifically the use of mandatory 
          tax increment financing."

           ARGUMENTS IN OPPOSITION  :    According to the Cal Tax 
          "Eliminating voter approval for infrastructure financing 
          removes the people from the decision process of what their 
          communities will look like, how bonds are issued, and how 
          property tax revenues are spent.  Tax increment financing 
          also produces unfavorable results for local school 
          districts and public safety, since property taxes are 
          earmarked for specific purposes."  
           

          AGB:kc  4/28/11   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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